Bharti shares tank on MTN bid

By Our Special Correspondent

Mumbai, May 6: The news that Bharti Airtel is making a bid for a 51 per cent stake in the African telecom giant MTN proved a nemesis for the stock on the exchanges on Tuesday. The stock closed 5.3 per cent down at Rs 846 losing Rs 47. It pulled down other telecom stocks like Reliance Communications which lost Rs 10.95.

Market men were wary about how Bharti would service the $11bn debt that it would have to raise to finance the acquisition. Interestingly, while Bharti’s stock was down, MTN’s stock rose 5 per cent on opening at the Johannesburg exchange.

Mr Deven Choksey, the MD of K.R. Choksey, said that "stocks always get hammered when a company proposes to go in for an acquisition. It happened in the case of Tata Steel’s acquisition of Corus."

Analysts are of the view that Bharti’s cash flow is around $1 billion and it would not have recourse to MTN’s cash flow in the way Tata could use Corus funds. While Bharti has been silent on details, it is suspected that the company has spoken to the Financial Times which has been the only source of all the details that analysts have been dissecting. By the end of the day Bharti tried to undo the damage by saying it had not made any offer to MTN.

The market was expected to open negative on global cues also because it had lost momentum on Monday. But the three surprises were the way Bharti stock was hammered, the loss of 4.5 per cent in realty stock index and the way the technology stock bounded up in the last few minutes of trade. Because of the technology stocks the Sensex was able to wipe out almost 150 points from the days low to close down just 118 points at 17,373.